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After The Ring: Starting A Marriage On The Right Financial Foot

Are you one of the 6 million American couples that planned or received an engagement this past Valentine’s Day? Have you otherwise recently become engaged or tied the knot? Going from “yours and theirs” to ours obviously has some significant financial aspects. Here are a few things to consider:

Credit

No, your credit scores don’t merge when you get married, but if you apply for joint loans like a mortgage, the person with the lower credit score can drag down the person with the better score. The score of the higher earner is of particular importance. Be sure you know your credit scores before applying for any joint loans, and take steps to improve and protect both of your scores.

First, you can each get free copies of your 3 credit reports (Experian, Transunion, and Equifax) at AnnualCreditReport.com if you haven’t done so in the last 12 months. Be sure to correct any errors you may find that could be hurting your score. Second, consider using sites like Credit Karma and Credit Sesame for tips on how to improve your scores and free credit monitoring. While credit monitoring can alert you of identity theft after the case, putting a security freeze on your credit reports can prevent someone from opening credit in your name in the first place.

Money Management

Should you set up joint accounts? Joint bank and credit card accounts can simplify household expenses and make you feel more like a couple. The money is also immediately available to your spouse should something happen to you and vice versa.

However, there are pitfalls to avoid too. Not knowing whether your spouse has written a check or made an ATM withdrawal can actually make managing money harder. Any debt or delinquencies of your spouse become yours too. There’s also no privacy when one of you wants to make a surprise gift to the other. (Why else would you want financial privacy from your spouse, right?)

One option is to have one or more joint accounts for household bills and savings and separate accounts for personal expenses. Most states allow you to set up your individual bank account with a POD or “payable on death” registration that allows the account to pass directly to your beneficiary without going through the time and expense of probate. To help you manage your joint accounts, you can both use sites like Mint or Yodlee MoneyCenter to monitor each other’s expenses and withdrawals.

Estate Planning

Now would be a good time to create or update your wills, durable powers of attorney, and health care directives. You’ll also want to update the beneficiary information on any retirement accounts, life insurance policies, and trusts you may have. This is especially true if they still list an ex-spouse since the beneficiary registration generally trumps whatever you say on a will. Making your spouse the beneficiary on your retirement accounts also gives them the unique ability to roll the account(s) into their own IRA, allowing them to potentially benefit longer from tax deferral.

Saving Money

If you’re not already living together, doing so can provide lots of opportunities to save money and even get some extra cash. Not only will you not need to maintain two residences, but you can eliminate redundant bills and sell possessions you no longer need in a garage sale or on sites like Craig’s List or Ebay. Just don’t let new expenses automatically arise to fill the gap.

New Risks

If you become a single income household, it obviously becomes important to have life insurance in case something happens to the breadwinner. You may also want to insure the stay-at-home spouse if they’re taking care of children and the surviving spouse would need to hire help to replace them. When determining life insurance needs, don’t forget to account for possible Social Security survivor benefits for your children and spouse.

If you’re a two-income household, you may feel more secure but you may actually be at more risk. After all, if you’re on your own, you only need to worry about your job. If you’re married and dependent on both incomes, you need to worry about both of your jobs. That can make having an emergency fund even more vital.

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